Tax Planning

TAX PLANNING

Take the confusion out of year-end tax planning by partnering with Wilson Porter.

For small businesses and individuals alike, it’s imperative that tax obligations are fulfilled intuitively and efficiently — that’s time and money saved.

That’s why Wilson Porter’s taxation services offer unrivaled value. Our team have experience with businesses of every kind, and we understand that no two tax plans look the same.

Our accountants evaluate your taxable income through an industry-specific lens and determine the best tax planning strategy, including assessing available tax deductions and identifying unique tax obligations. Our personalised approach will achieve the highest returns possible for your business while fulfilling all obligations to keep your business safe.

COMMON QUESTIONS

To be as proactive about your tax plan as possible, it’s important that you understand how taxation works and how business owners can be strategic.

Some questions that we hear from small business owners are:

Why is tax planning important?

Most people want to complete their tax returns as quickly as possible, so spending extra time composing a plan might not sound feasible. However, ensuring you comply with state and national tax laws can help you save time and money. It’s one of the best ways to help your business thrive.

When business owners file tax returns without devising a comprehensive plan, it’s possible they aren’t being as strategic as they could be, and this could result in them paying more tax than they need to. For instance, businesses can often deduct certain expenses while reducing their overall taxable income. Wilson Porter can do this work for you, enabling you to focus on your business operations while we handle the fine print of taxation.

How many types of tax do I have to pay?

Depending on your organisation, you may face taxation in several forms: individual taxes, corporate taxes, property taxes and international taxes. These are collected by the Australian Taxation Office (ATO) and used to fund government initiatives and projects.

Individual tax: This is the tax that every income-earning individual in Australia faces. Individual income tax is collected at a progressive rate, meaning the more you earn, the higher percentage of your income you owe in tax. So, as the income that you earn from your business increases, so does your marginal tax rate.

Corporate tax: Corporate tax is unique to business owners. It is a tax on the profits that your business generates, and it is separate from your individual income tax. Company tax is calculated based on the assessable income of your business — the gross amount of money your business makes through day-to-day operations — minus any deductions you claim. A business can claim deductions for costs that are necessary to run and grow their operations. For example, if you own a taxi company, the maintenance costs of the vehicles you use may be tax deductible.

Stamp duty occurs when you purchase the property. It’s a tax on the transaction, and it’s owed to your local state or territory government. Stamp duty can apply to several different transactions, including signing a lease or taking out a mortgage, transferring property or purchasing a motor vehicle. The amount of tax you owe due to stamp duty varies on the size and type of property purchased as well as the specific laws in your state or territory, which vary.

Land tax is charged to landowners annually by state or territory governments, except in the Northern Territory. Similar to rates, the amount of land tax you will need to pay depends on the value of your property. Check the land tax laws in your state or territory — they vary, and certain organisations may be exempt from paying land tax.

International tax: If your business expands beyond the Australian borders, you will likely be subject to international taxes. By receiving an income in another country, you will be taxed according to that country’s tax laws, and you might be taxed in Australia, too. However, Australia has tax treaties with a number of countries, which is intended to limit the amount that businesses are double taxed.

Capital gains tax: If you sell a capital asset, such as your business, a vehicle or a building, you will either see a capital gain or a capital loss. This is determined by whether you sold the asset for more or less than you purchased it. If you make a capital gain, your earnings from the transaction will be added to your assessable income, resulting in an increase to the amount of individual taxes you need to pay. So, business owners who are considering selling their company or the associated property should ask a tax professional about how capital gains tax would impact them.

How can I reduce my tax burden?

Due to Australia’s progressive tax laws, the higher your income, the more tax burden you face. With certain strategies, however, you can lower your tax burden while still complying with tax laws.

If you run a business, chances are you spend money on expenses to operate, improve or expand the company. Typically, these costs are tax deductible. Don’t leave anything out when claiming tax deductions — even seemingly small expenses might count. Completing your tax return with the help of an expert can help you catch costs you might otherwise miss.

Additionally, you can utilise salary sacrificing to alleviate some of your tax burden. Salary sacrificing is when workers redirect a percentage of their pre-tax income toward another expense, some of the most common being superannuation, a vehicle or a home. These benefits are taxed as well, but if your marginal tax rate is higher than the flat rate at which these assets are, you may reduce your overall taxable income by salary sacrificing.

Donating to charity can also reduce some of your tax burden. If there is an organisation you care about, donating at least $2 to their cause can be claimed as a deduction on your tax return. While you won’t receive the amount of the donation as part of your tax refund, it will be subtracted from your assessable income, lowering the total tax you owe. This is a great way for people to control where some of their money goes and contribute to a cause that’s important to them.

The best way to learn how to reduce your tax payable is to meet with an accountant. A Wilson Porter team member will uncover deductions as well as introduce you to financial strategies that lower the amount you owe.

How do I create a tax plan?

With the help of accountants, you can devise a tax plan that minimises your financial burden while complying with state and federal laws.

First, keep accurate and detailed records of your financial affairs, within both your personal and professional life. This needs to be done on a day to day basis in the form of updating your spending and earning records, and you should review your documents frequently enough to have an ongoing idea of your financial situation.

Next, review your options for reducing your tax burden and assess your eligibility for them. All businesses are different, and your tax requirements will depend on the type of business you operate, its location or locations and the amount of income you earn.

Lastly, meet with a tax expert. Wilson Porter has a network of professionals that can assess your business and financial situation to devise a tax plan that meets your legal requirements while minimising your tax liability as much as possible. We have a range of services for a variety of needs.

OUR SERVICES

TAX PLANNING & ADVICE

Tax planning involves reviewing your assessable income and tax obligations and generating a strategy that benefits your business. It’s important to have a comprehensive tax plan because, without one, you could end up paying more than you need to.

We provide end-of-year tax planning and advice to streamline your returns strategy and maximise gains. We will also take a look at the links between your business and personal finances and any other financial arrangements your enterprise may have with family, friends or other entities.

GOODS AND SERVICE TAX (GST)

GST-registered businesses are responsible for collecting goods and services payments and sending them through to the Taxation Office in a Business Activity Statement. Determining your GST income and keeping it separate from your regular earnings can become complex, especially over the course of a financial year.

Our Business Activity Statement preparation guarantees efficiency. We offer this as a full preparation service, handling all of the necessary administration, or we can offer expert consultation on how your business should be preparing your GST accounts for review.

INCOME TAX RETURNS

We offer income tax return consultation services to help you meet your compliance obligations. Our friendly accounting professionals can help you ensure your returns are in order, giving you peace of mind for another 12 months.

FRINGE BENEFITS TAX RETURNS

Fringe benefits tax is entirely separate from income tax, with a different financial year and deadlines. Our expert knowledge of fringe benefits tax comes from over 20 years of experience in the accounting and finance sector, meaning we can make completing your fringe benefits tax return as stress-free as possible.

We offer a full assessment of your business’s liability and work with you to develop strategies to minimise your tax obligations.

LAND TAX AND PAYROLL TAX

If you own your business’ site and your land is determined to be above the state threshold, you will likely need to pay land tax. Payroll tax, meanwhile, applies to all businesses who pay employees and have a wage bill higher than the state or territory threshold you operate from.

WHY WILSON PORTER

At Wilson Porter, we know how important it is that all small businesses are compliant with all tax obligations.

We work with your business to develop a tax strategy that not only adheres to all of your obligations but also benefits your business by achieving the highest returns possible. Utilising one of our team members will save you time and money, giving you more flexibility to grow your business.

Is figuring out your tax obligations and getting everything together taxing you?

Wilson Porter have solutions for you. Simply fill out our contact form to find out more.

What is the current concessional superannuation contributions cap?

The concessional contributions cap for 2023/24 is $27,500 and the non concessional contribution cap is $110,000.

The concessional contributions cap for 2024/25 is $30,000 and the non concessional contribution cap is $120,000.

Contributions over the cap amount are subject to extra tax. This extra tax is called the excess concessional contributions tax.

All concessional contributions to all of your super funds in a financial year are counted toward the concessional contributions cap. If you have a defined benefit super interest, notional contributions are also counted towards the cap.

If you have a residential rental property are you claiming a building write off?

You can only claim a deduction for the capital works on residential rental properties you built after 17July 1985.

If you own a rental property, you may be able to claim a deduction (usually at the rate of 2.5% per year in the 40 years following construction) for the construction cost of:

buildings
extensions, such as a garage or patio
alterations, such as adding an internal wall, kitchen renovations or bathroom makeovers
structural improvements – such as a gazebo, carport, sealed driveway, retaining wall or fence.

If you carried out the construction or contracted a builder to do so, you should make sure you keep detailed records of the construction costs.

If you purchased the property and do not have a record of the construction costs – for example, where the vendor did not provide them – you will need to obtain this information from an appropriately qualified person such as a quantity surveyor.

Interest Deductions on Loans used for mixed use

Interest can only be claimed as a tax deduction when the funds borrowed are used for income producing purposes, that is to buy a rental property or shares, etc.

It is common practice for financial institutions to offer redraw facilities against existing loans. This leads borrowers to draw down against the loan for other purposes, which may or may not be income producing.

Example: Phillip borrows $250,000 to buy a rental property. After 5 years the loan has reduced down to $120,000, the bank notes Phillip’s good repayment record and offers him to re-borrow against the house for other purposes. Phillip does so and draws $50,000 for a car for private purposes. The loan is now at $170,000.

Phillip wants to claim a tax deduction for all of the interest, however Phillip can only claim interest on the $120,000 because the $50,000 was used for private purposes. Any future interest paid can only be claimed on a proportionate basis of 70% being the amount relating to an income producing asset over the total amount of the loan (120,000/170,000).